Corporate Law

There have been notable developments in the corporate law (Saudi Companies Law) in Saudi Arabia. If you are an investor who is interested in establishing a business in Saudi Arabia, it is important that you understand the corporate sector to avoid unnecessary inconveniences issues. Below is helpful information about the new Companies Law in the Kingdom.

Interim Period

According to the new law under article 224, existing companies are given 12 months to ensure that they bring all their activities into compliance with the law. Existing companies still need to comply with this new law until the 12 months are over to avoid penalties that are applied to offenders of the law from the Effective Date. The Capital Markets Authority (CMA) as well as the Ministry of Commerce and Investment (MoCI) determine particular provisions which apply during the interim period.

Constitutional Documents

Templates are available on MoCI website such as articles of association (AoA). Also, the website includes templates for bylaws for joint stock companies and different types of companies. These templates were made to help companies set up their constitutional documents in a fast and easy way.

Below are some examples of the provisions in the new Companies Law:

  • Article 90 – regulating shareholders meetings;
  • Article 95 – cumulative voting for board elections and certain situations where directors are prohibited
    from voting.
  • Article 68.1 – the number of directors;
  • Article 76 – directors’ remuneration;
  • Article 81.1 – the functions of the Chairman, Deputy Chairman and Managing Director;
  • Articles 101 – 104-certain provisions relating to Audit Committees;
  • Article 150 – dealing with losses of JSCs (although listed companies have to make a monthly announcement of their plans and actions to comply if losses incurred equal or exceed 50% of capital in the interim period);
  • Articles 182 – 186-dealing with Holding Companies.

Also important changes for LLCs:

  • Financial statements to be prepared within 3 months of year end and filed within a further 1 month
    (previously 4 months and 2 months);
  • Suspension of set aside of statutory reserve when it reaches 30% of capital (previously 50%);
  • Changes to statutory pre-emption process including added flexibility on valuation;
  • New procedures and effects where losses reach 50% of capital.


Foreign Investment

In 2015, the Saudi Arabian General Investment Authority (SAGIA) announced that foreign companies can set up a 100 percent foreign trading companies. After the Saudi Vision 2030 was announced, the Saudi Council of Ministers made changes to the implementation. It was later announced that only large international companies qualify for 100 percent foreign ownership.

With the numerous procedural and regulatory changes currently affecting companies in Saudi Arabia, it is important for investors and existing companies to understand the changes made in Corporate Law (Saudi Companies Law). It is advisable to review these changes quite often to stay informed and to act accordingly.


Guidance regarding corporate law in saudi arabia.
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